Product-Based Pyramid Scheme Definition

Product-Based Pyramid Scheme Definition:

A product-based pyramid scheme is an income opportunity, in which persons are recruited into a pyramid of participants making ongoing personal purchases or retail sales of products and services. These persons recruit others to do the same in an endless chain of recruitment and personal consumption or retail sales. This is done in order to qualify for commissions and bonuses and to advance upward in the hierarchy of levels in the pyramid. Personal purchases or retail sales become the means of disguising or laundering investments in the product-based pyramid scheme.

Additional note:
Typically, prospects are lured into the scheme with exaggerated product and income claims. And because the pay plan is heavily stacked in favor of those at the highest levels in the pyramid, the vast majority of participants spend more than they receive and eventually drop out, only to be replaced by a stream of similarly misled recruits, approximately 99% of whom are likewise destined to experience loss and disappointment. – Source Research-based web site Mlm-thetruth.com

Modern pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions. While the sale of goods and services nominally generates all commissions in a system primarily funded by such purchases, in fact, those commissions are funded by purchases made to obtain the right to participate in the scheme. Each individual who profits, therefore, does so primarily from the payments of others who are themselves making payments in order to obtain their own profit. – Source FTC Division of Marketing Practices James Kohm

Pyramid schemes—also referred to as franchise fraud or chain referral schemes—are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product. The real profit is earned, not by the sale of the product, but by the sale of new distributorships. Emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses. At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment. Promoters fail to tell prospective participants that this is mathematically impossible for everyone to do, since some participants drop out, while others recoup their original investments and then drop out. – Source FBI.gov

Here is an informational video on identifying and protecting yourself against pyramid schemes.

Take a look at this : affiliateor .com
Tell me what you think about this.
I am a Franchisee in the company for 2 years and made my money from selling vacations only, Without recruiting people. We do have the cheapest prices for 90% of the time… And we have lot of costumers but some people still don’t believe that this is potential business. Just because there is an option to earn 50$ for every person you recruit they start abusing. And for that that i need to pay 150$ each month to market tools.
People say that this is a typical Pyramid.
Would like to hear your opinion.
Thank you.

The SECRET in every MLM venture .
Have real good lawyers
Have real mystique ( unique) products ( mangos , jungle fruits ,
super water , super dust etc.
Make it look luxury
Price it , for a 1000% overpriced
Fix a real complicated comp plan that few
can understand even you must have some
difficulty to understand it .
Give hypothetical cars travels and big bonuses
only high in the latter ( the higher the better )
Make it look like a dream ( fantasy)
After some years grab the money and RUN !!!

First, somehow FTC still cannot tell MLM from pyramid schemes, thus no real supervising and far too slow enforcement.
Second, a bulky political and economical lobby, thus very few celebrated cases, if any.
Third, most victims are taught to believe it’s their own fault and they afraid libel claims for or from their downline (recruited) and upline (sponsors), thus no court hearings.
Fourth, if victims are brave enough to file a class action, then they are forced either to the out-of-court settlement or the company’s court of arbitration (guess who’s the judge).
Fifth, even under prosecution a company owner et al still could “re-brend” it as something new, thus no real point.

And the last–all the evils and crimes survive for at least thousands years–does it prove its legitimacy?

hi Ethan stumbled on your post and immediately started subscribing. there’s a new scheme being run by the swiss gold team called Eagle Aurum can you help me confirm it’s authenticity or lack thereof. Would need some information to back up my claims that it’s a scam to family y and colleagues thanks

Hi EThani, read your input on swissgolden and pyramids. I like your advice. Is encouraging. But I will like you to investigate MMM and swissgolden platforms. They are here in Nigeria recruiting and lured people to there business….Casmir Nnamani from port harcourt Nigeria.

So, do you think the home based businesses where you sign up to become a consultant (i.e. Younique (makeup), Pampered Chef (kitchen products), Longaberger (baskets), Thirty-One (bags/totes), Stella & Dot (jewelry), Keep Collective (jewelry), Chloe & Isabelle (jewelry), Do Terra (essential oils), are all scams? To me they fit the definition of a scam. To my knowledge, all of these will pay the consultants x% commission for sales of the people they recruit plus the commission they are already earning on their own sales. Have you ever looked at any of these companies? I read your opinion on Mary Kay. I’d be interested to hear your opinion on these. What is fascinating is that even though these appear to be scams, the companies are very good at getting sales. For example, I know women that are very faithful to Thirty-One, and they only buy their purses from there. IMHO it is overpriced.

If they pay for (primarily) recruitment, then it’s a scam,
If they pay for sales (primarily) to other participants disguised as quotes, then it’s a scam.
If there’s no or very few real end users/clients, who buy the product for the value, not a notorious ‘business opportunity’, then they break “70% Rule” and it’s a scam.
If even 50% of deemed ‘businessmen’ don’t earn enough for years, then it’s a sheer scam.
If your so-called potential sponsor cannot prove his NET profits from MLM, then it’s a scam.
If the product is allegedly incomparably unique (how come?) and overpriced (some 50% for “structure” and 25% for sponsors), then it’s a scam.
If the only way to become rich is at the expense of the gullible victims, then it’s a scam.
And so on, alas.

If this is illegal, then what is a company called if they pay a rep more money if they recruit more people to invest in their scheme to invest their money? I see investment groups advertised on tv everyday… Hmm With noproduct sold. HMM Hypocrisy at its finest Ethan…

Hi Ethan, read your information about about AIM. It was very informative. I will like you make an investigation also about GNLD as well. They are ripping people off here in Nigeria. They keep promoting recruitment instead of the product itself. They also make deceptive job posts on classified sites but on getting there, they introduce you to their pyramid scheme. A total rip-off here. Please do something about GNLD.

Oooh I remember them! I was a college kid at the time and had a phone call with someone who was not able to adequately answer my questions about the “opportunity”. He made a comment that suggested something was wrong with me- I wasn’t cut out for this – they only select certain people or something like that. I chuckled to myself and told him I was interviewing him just as he was interviewing me. They failed MY interview.

I went to a the interview today. I am 55 so they treated me with respect. As the recruiter went thru his presentation on how financial planning benefited families, I would interject what I knew about the subjects.
After all it was a job interview. By the end of it the kid learned far more than anything Primerica ever
taught him. He was taking notes and wrote down all the references to experts like Speigel and Harry Dent.
He introduced me to the top guy, he asked me what I thought and I said I would have to go home and ask my smarter half. We said our good byes and that was it. They are a pyramid, and should not be trusted.
The problem is the executive level managers don’t care about the company reputation since they go after the first timers. The only real value this company has is the valuable lesson of business dishonesty is taught to young people for a very cheap price of $99. At 250,000 dissatisfied recruits per year it will take awhile for their
reputation to catch up with them.

Possibly. Although i have never looked into it and showed any big interest in it myself i would thoroughly do some research first. Sort of skirt around the edges of it but don’t follow through with any commitments.